From Texas, I mostly cover the energy industry and the tycoons who control it. I joined Forbes in 1999 and moved from New York to Houston in 2004. The subjects of my Forbes cover stories have included T. Boone Pickens, Harold Hamm, Aubrey McClendon, Michael Dell, Ross Perot, Exxon, Chevron, Saudi Aramco and more. Follow me on twitter @chrishelman.

President Obama Gets It: Fracking Is Awesome

“After years of talking about it, we are finally poised to control our own energy future. We produce more oil at home than we have in 15 years. We have doubled the distance our cars will go on a gallon of gas, and the amount of renewable energy we generate from sources like wind and solar – with tens of thousands of good, American jobs to show for it. We produce more natural gas than ever before – and nearly everyone’s energy bill is lower because of it.”

Yes indeed, thanks to fracking, crude oil production in the United States is surging. From a low of 5 million barrels per day in 2008 output has shot up in a hyperbolic curve to 7 million bpd as of last week.

The last time America’s petroleum output was that high was back in 1992 — 20 years ago.

What’s more, U.S. imports of petroleum have fallen to the lowest level since 1999. (Below 10 million bpd today versus 14 million bpd in 2005.)

Due to a 12% decrease in gasoline consumption during the last four years of recession, we’re using less petroleum too.

The result is that our exports of petroleum products are up nearly 150% in three years to a record $140 billion. As hyperbolic as the increase in oil production has been, so has the decrease in our petroleum trade deficit, falling from $360 billion a year ago to an annual rate of $224 billion today (less than half the $500 billion annual oil deficity of 2008).

This is an awesome accomplishment. And it is all thanks to fracking. Without the techniques of horizontal drilling and hydraulic fracturing, this Great American Oil & Gas Boom would simply not exist.

What’s more, as President Obama said tonight, “over the last four years, our emissions of the dangerous carbon pollution that threatens our planet have actually fallen.”

That’s right, whether you think carbon emissions are dangerous or not, the fact is that they have fallen. According to this report from the Environmental Protection Agency, U.S. emissions of greenhouse gases fell 4.6% in 2011. Most of this decrease was due directly to the decreasing use of coal in power plants and the increase in combustion of clean-burning natural gas.

And thanks to fracking, there’s plenty more natural gas to displace coal.

Power plants are by far the biggest greenhouse gas emitters, accounting for 2.2 billion tons of carbon dioxide emissions (67% of the total).

No wonder President Obama said tonight that “my administration will keep cutting red tape and speeding up new oil and gas permits.”

That’s music to the ears of the oil and gas industry.

But then why does the president have to go and mess it up? In his speech tonight he said:

“Indeed, much of our new-found energy is drawn from lands and waters that we, the public, own together. So tonight, I propose we use some of our oil and gas revenues to fund an EnergySecurity Trust that will drive new research and technology to shift our cars and trucks off oil for good. If a non-partisan coalition of CEOs and retired generals and admirals can get behind this idea, then so can we. Let’s take their advice and free our families and businesses from the painful spikes in gas prices we’ve put up with for far too long.”

First of all, we don’t need any new federal bureaucracy, and we certainly don’t need any portion of the $10 billion in federal royalties from oil and gas production on federal lands to go into a slush fund from which bureaucrats get to pick pie-in-the-sky technologies to invest in.

As far as I can tell, this idea of an Energy Security Trust comes from this ill-fated house bill from 2009 that sought to tax carbon dioxide emissions and direct the tax into a trust fund that would pay for alternative energy research and (bizarrely) offset payroll taxes for poor families.

An energy trust fund is a terrible idea, and could well be considered a backdoor approach to reopen the debate on the national carbon tax. We don’t need either.

Society already benefits tremendously from cheaper, more plentiful American oil and gas. Thanks to fracking, lower natural gas prices already save consumers $100 billion a year – far more than any crumbs the federal government might want to dole out. What’s more, the energy industry doesn’t need the government’s help when it comes to investing in energy infrastructure or research and development. This year American oil and gas companies will make well over $100 billion in capital investments, with Chevron and ExxonMobil alone accounting for $70 billion.

Thanks to fracking, the United States can become not only energy independent of the rest of the world (oil will still be a global commodity with prices set on the world market) but definitely more energy secure. Fracking saves us money; fracking creates jobs; fracking reduces greenhouse gas emissions. God bless fracking.

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A subsequent study by another group at Cornell has shown that the Howarth study is flawed:

“[Howarth et al.’s] analysis is seriously flawed in that they significantly overestimate the fugitive emissions associated with unconventional gas extraction, undervalue the contribution of “green technologies” to reducing those emissions to a level approaching that of conventional gas, base their comparison between gas and coal on heat rather than electricity generation (almost the sole use of coal), and assume a time interval over which to compute the relative climate impact of gas compared to coal that does not capture the contrast between the long residence time of CO2 and the short residence time of methane in the atmosphere.”

http://link.springer.com/article/10.1007%2Fs10584-011-0333-0

Researchers at Carnegie Mellon arrived at similar conclusions when looking at GHG emissions from the production of gas in the Marcellus shale.

If you read what I posted, you would note that the second study I posted from Cornell was a direct response to Cathles, which was the main author on the paper you posted.

The title contains the words “Response to Cathles et al .”

So if you believe Cathles, fine, but Howarth et al responded and gave good evidence as to why Cathles is wrong. This is the beauty of science.

Regarding the second study: “Methane leakage rates throughout the natural gas system (excluding the preproduction processes previously discussed) are a major concern and our analysis has an implied fugitive emissions rate of 2%, consistent with the EPA natural gas industry study (US EPA 1996, 2010).”

Two things to note: 1. The study uses an “implied fugitive emission rate of 2%”. This comes from an EPA study done back in 1996, which discusses conventional wells, not multi-well pads that use horizontal drilling with long laterals.

2. A recent study by NOAA indicates that the emission rate of methane is closer to 9%, which is more in line with the Cornell study. This study was published in 2012: http://onlinelibrary.wiley.com/doi/10.1029/2011JD016360/abstract

Look at Figure 5. When carbon capture technologies are used to, natural gas has higher green house gas emissions. In fact, the authors note this:

“When advanced technologies are used with CSS then the emissions are similar and coal provides slightly less emissions. This implies that the upstream emissions for natural gas life cycle are higher than the upstream emissions from coal, once efficiencies of power generation are taken into account (Jaramillo et al 2007).”

Another great speech by LoopyEars-in-chief at the DC circus tent of fools who have destroyed the economy and bankrupted this ex-great nation. During the last Depression when Democrats actually cared about the people, President Roosevelt’s Work Programs Administration (WPA), spent $13 billion, President Obama’s $788 billion stimulus program sought to create jobs for the sole sake of creating jobs but unlike the WPA, which actually succeeded in employing three million people, Obama’s “stimulus” failed to create any jobs at all. And of the few produced, they’ve certainly not been the “shovel-ready” ones he promised. Four more years lost in the wilderness.

Yes President Obama understands that fracking is definitely an enormous part of the answer to energy needs, not just in the US, but, importantly, through exports of natural gas, thereby strengthening the US economy even more. And I’m glad that Forbes understands that Mr. Obama gets the fracking message, and I applaud Forbes for helping to education the public about fracking, to counter the many misinformed and–let’s call it what it is–the disinfomation anti-fracking lobby.

However, even though I generally agree with Forbes take on new government bureaucracies, in this particular case, Mr. Obama may actually have a good idea. Here’s what he actually said on the subject:

“So tonight, I propose we use some of our oil and gas revenues to fund an Energy Security Trust that will drive new research and technology to shift our cars and trucks off oil for good. If a non-partisan coalition of CEOs and retired generals and admirals can get behind this idea, then so can we.”

If President Obama is sincere on using the US Government to advance cars driven by, say, natural gas (or in combination with electricity), to replace traditional gasoline engines, then I say that is a great idea. Forbes should not dismiss the idea of the government taking the lead on such a matter, as, in fact, history shows that the government can be extremely effective in fostering these technological advances and innovation. Recall, for example, that the Internet was a US Government creation. And there are many other examples. Never forget that the US Government can be extremely efficient and effective when it has a truly solid goal. (Think, for example, of The Manhatten Project, in which a braintrust was assembled to make the US into a preeminent nuclear power, before the Axis did.)

Sometimes industry and market forces need a push or a subsidy to make things take off, and broadening the use of our tremendous natural gas resources, to accomplish the goal of having automobiles run on natural gas, for example, is a very sound one. Of course, if the real purpose is not to advance the private market, then yes, Forbes is absolutely correct. But let’s hope that the President really means what he says.

Misinformed? Disinformation? I think it is ignorant to call the entire anti-fracking movement misinformed.

There are many of us that just want to see more research. I read the peer-reviewed literature and form my own opinion of it. Is peer-reviewed literature perfect? Of course not, but I tend to trust the scientific process.

Here is a (very small) list of peer-reviewed studies that I think justify my want for more science:

Land Application of Hydrofracturing Fluids Damages a Deciduous Forest Stand in West Virginia https://www.crops.org/publications/jeq/abstracts/40/4/1340?access=0&view=article

I will gladly provide more studies if you would like.

If reading science makes me misinformed, than so be it. Again, all I am asking for is more science. I am not claiming contamination (although the industry admits to methane migration), I just think these studies raise concern. The last thing I want are large quantities of methane and BTEX chemicals in the air and water.

Side note: My concern is NOT the instance of hydraulic fracturing. My concern is the entire process / life-cycle of a well. I think it is a problem that people refer to “High Volume, Slick Water Hydraulic Fracturing on a multi-cluster well-pad using horizontal drilling with long laterals” simply as “fracking”.

A few thoughts to your “Recall, for example, that the Internet was a US Government creation.” statement.

While the “internet” originated from a defense program, it was nearly 20 years later before private innovations and the world wide web brought us the technical revolution you see today. Also, the growth and success of the internet can also be traced to the hands-off approach government took. As soon as laws and regulations start to creep in, look for innovation to suffer. So let’s temper that praise some.

The Manhattan project was that, a project, with a definitive end. A new bureaucracy would not end and like other areas, it would be ripe for politization and corruption. It would permantly divert money from things that should be prioritized ahead of public research, like revamping the national infrastructer to support new energy sources. Research is still being done privately. You also do not want to kill the incentive/rewards of private research or we may unwittingly slow/delay innovation instead.

I like how Obama attributes the gains in oil production within the United States to himself/administration. “After years of talking about it, we are finally poised to control our own energy future.” There is such a thing as randomness and Obama’s success within the energy sector of the United States is irrefutable evidence. Obama- read Taleb’s “The Black Swan”. Maybe this will help you learn when to take credit and not. As far as oil production and all it entails: I contain great excitement for the economic ramifications that this may hold in store. Lower gas prices, more jobs, heavier spending, influx in market revenue; all of this is excellent. As far as a council of experts to supervise and encourage research; I do not think this is a well thought through idea. Government competition with small business is a “no go” in the U.S. Although the societal benefit would be relatively high, the United States allows the individual as well as society to remain #1. Do I think Obama should activate a council of bipartisan executives of oil companies for his own use and knowledge? Yes. Information is key to survival. For those who may comment, answer me this: If the United States becomes energy independent due to our new found reservoir of shale, how will this effect relations within the Middle-East since we no longer “need” anything from them?

I agree that Obama hypocritically tries to twist the success of fracking into something he can claim as he governments own, such as when he calls the profits “our” profits. But lest anyone forget, the fracking success occurred only because the government/Obama had no control over privately held mineral acres. If mineral acres had been owned by the government (such as in some European countries), Obama would have prevented nearly all of the drilling, such as he has done with all the federal mineral rights under the government control. The grand “fracking” experiment would have never been given a chance to succeed if left up to Obama. Yet he obscenely calls it “our” profits, and insinuates that there is a moral obligation to use those profits to support all the green energy projects that have already failed under the Obama administration.

If the “Energy Security Trust” is anything like the Social Security Trust Fund I predict great success. As fast as people who actually work for a living pay into it, politicians will be shoveling it out the back door to the people who own their souls.

Let it rest Forbes. No one ever made money on nat gas so stop dreaming and sell your tin mines and your coal mines and dump those timber partnerships. Hey wanna buy that new dang? What’s it called? nukes. Or do they scare u cuz they don’t jive with the New Test?

huh? no one ever made money on nat gas? tell that to natgas billionaies like george mitchell, trevor rees-jones, rod lewis, jeff hildebrand. and what’s wrong with timber partnerships — timber is a great portfolio diversifier. as for nuclear — i’m a huge fan. after hydro it’s the cleanest, greenest electricity there is and the only scalable source of zero-carbon fuel.

Go look at developmental cost of nuclear energy. Maybe that will turn you off from going and starting your own plant too. (If the actual cost of creation is not enough, look at the cost of disposing of waste). Fun reading. Christopher Helmen, I enjoyed the article.

First of all nuclear is not a zero carbon fuel. Does the equipment building the nuclear sites run on nuclear power? Do the trucks that transport the waste run on nuclear? Etc etc etc. You know what removes carbon though, timber. Or as people who don’t work for Forbes refer to them; trees.

Cheap Nat Gas has opened the door for another American Industrial Revolution where individuals have created businesses and made millions. Don’t miss another opportunity, learn to convert fleets to run on Nat Gas. Stephanie@CNGUnited.com

The President made claims he can’t support. Energy consumption is down because the economy is underwhelming. We are importing less oil because the miles traveled by drivers is down. Fuel economy has not doubled as he lied last night. 2012 fleet weighted mpgs is barely 1 mpg more than it was in 2011 and that is around 21 – 22 mpgs. Any oil and gas production increases is all due to private companies risking private funds, not because of any increases in permitting which has not happened. The President was basically lying through most of the speech last night. But that is his game. Lies.

Lies is a bold statement. I understand what you are saying, “The numbers don’t lie, the statistician does.” Really, I get it. I don’t know what data set Obama used, but I guarantee you he has it cited somewhere. As far as the decrease in oil importation, I would recommend reading on the massive levels of oil found in the Bakken formation in North Dakota and similar drilling areas in the U.S.. You may find that you misunderstand the importation ordeal, if I am wrong, please correct me. Back one more time to Obama’s claim for increase in Mile per Gallon: Most likely Obama is talking about an outlying extremity well beyond the normal “bell curve” of 21-22 mpgs. The 21-22 mpgs is a national average, including older vehicle models. Now to address your comments on the lack of government involvement on fuel production, politics and oil expansion are directly correlated. Read some on the process of obtaining rights to drill and you should see the correlation. If this doesn’t cut it for you, look at a Goldman Sachs’ weekly market performance outline (available to the general public) and notice the macro-analysis within the Energy and Basic Materials sectors. Politics is all about interpretation of events, most with notable impact can be written of to randomness, not to governing styles. It does not matter if we compare Reagan’s performance to John F. Kennedy’s; the events that took place on their watch were hardly within their control, the situations the were dealt enabled them to make decisions with lasting implications. These decisions were made without all possible data and without a full understanding of potential risk. Credit will be given to presidents for events that fall within their term, regardless of whose fault. Trying to find who actually holds responsibility for actions is as futile as shoveling the water out of the ocean. There is to much impact from nearly all members of society in some way. I don’t know who to credit with the discovery of oil nor do I care to search, it will be Obama.

Love it or hate it, fracking and the associated oil and gas industry have been one of the main drivers of our recent economic recovery.

Lower fossil fuel energy prices have benefited all sectors of the economy, and that’s inconvenient for backers of renewables who are counting on subsidies and higher prices to tip the balance in their favor.

What economic recovery are you talking about? You do realize that the US was the largest driller of oil a mere half century ago right? But that will never happen with natural gas, and fracking is a much smarter energy source. We will never need renewables, so why start subsidizing them now? Idiot

You can’t breathe, drink, or eat what gets polluted from all the fracking. The future won’t matter anyway because fracking and tarsands will destroy the ability for our planet to be livable. The real heros are those who live by fracking…”weather” they signed up for it or not…sacrifical lambs we are. I live, breathe, and blog in BarnettShaleHell Arlington gasland Texas.

Fracking may lead to short team income for the US for the long term effects are unkown. Here in Canada, the oil and gas guys would dump the waste water from fracking into rivers, then they stopped when it was known that fish and wild life were dying. Then the gas guys went to local city water plants to have the waste water treated. The water was too polluted for local cities so now they pump the water in deep wells. Once the water has been put into the well it cannot be returned to nature. I have only written about the waste water from fracking……so many other issues and problems that we are just learning about.

Oil experts have debunked the hype already. Arthur Berman, an oil analyst with Labyrinth Consulting Services, says the promise of America’s shale reserves have been vastly overstated. The shale wells have a 38% decline rate, so constant drilling of new wells would be required to just maintain production. The cost is prohibitive. Their output has barely put a dent in overall consumption. The full article is in the businessinsider.com

check this out- http://www.powermag.com/print/issues/features/Is-Shale-Gas-Shallow-or-the-Real-Deal_5188.html Penn State geologist Terry Engelder, the major domo of Marcellus Shale (see sidebar), doesn’t share Berman’s pessimism about gas supply and prices, or Berman’s assessment of the production decline of shale gas wells. “All wells decline,” Engelder said in an interview. “What distinguishes shale wells from conventional reservoirs is the percentage of gas delivered over a long period of time.” Shale wells, Engelder said, start producing at very high volumes, decrease considerably during the first year, but continue producing much longer than conventional gas wells, because the tight rock formations slow the release of the gas.

With shale gas, Engelder said, “You have a steeper decline curve initially, but a much longer period of production.” That’s a function of the tight shale reservoirs, “with inherent low permeability,” he said. “The gas takes longer to get” to the well head “but remains economic over a longer period of time.”

Here is where it can get pretty wonky. Engelder notes that the dispute with Berman and others in his camp who say shale wells decline too rapidly is a matter of hyperbolic production curves versus exponential curves. Engelder is in the hyperbolic school and Berman is one of the exponential advocates. If a well’s decline is hyperbolic, Engelder explained, you get a decreasing rate of decline year after year. The best data for eastern shale wells available, he said, shows a general hyperbolic decline over a 40-year period, versus a 25-year lifespan for conventional gas wells.

Wow, I don’t often see “journalism” that is this brazenly pro-Big Oil. OK, you’re in Houston—I get it.

But it’s a little disorienting to read such determinedly ignorant climate denialism in a publication that purports to have at least a tenuous attachment to the world of objective facts.

Of course, your Dear Leader Steve Forbes lowered my expectations considerably when he wrote in Fact and Comment 20 or so years ago that mandating higher fuel efficiency for autos would actually INCREASE gas consumption because people would drive more (Yes, he actually said that. You could look it up.)

I dashed off a letter to Mr. Forbes congratulating him for perhaps unintentionally solving the fuel shortage. Clearly, the answer is to mandate LOWER mileage for vehicles, causing people to drive less and saving buckets of fuel. But apparently he didn’t jump on the idea.

Germany is generating 50% + of its energy from solar, Spain’s #1 source of energy is wind, and the price of wind in Australia is now cheaper than natural gas or coal. There’s no need for us to destroy our land and health for fuel sources like natural gas.

Ai caramba. Before you cash your check from the Koch brothers, just consider all the Federal R&D support that helped nurture fracking technology through the 1960s, 1970s, 1980s, 1990s and naughties to now. Does it not make sense to inveset in renewable R&D for a better future? One where we don’t have to spend a trillion or two dollars on wars to protect foreign oil supplies. One where we don’t spew cancer-causing particulates into the air we breath, or play Russian roulette with greenhouse gases? Whether you understand this or not, your sad piece is part of a relentless well-funded propaganda campaign against renewable energy sources that has JUST happened to coincide with their economic viability — as part of the energy mix. Along with your beloved fracking.

Obama’s comments are so hypocritical – if all the mineral acres had been under the government control (such as in some European countries) Obama would never have allowed the fracking experiment to succeed (like he shut down the Gulf of Mexico drilling). Yet now he has the audacity to claim the fracking revenues “our” revenues, as if he had played a responsible part in generating them. And wants to use them to support the same solar and other green energy policies that failed miserably (under the clouds of scandal) in his first term. Great article Mr. Helman.

———-” Yes indeed, thanks to fracking, crude oil production in the United States is surging. From a low of 5 million barrels per day in 2008 output has shot up in a hyperbolic curve to 7 million bpd as of last week.”———–

In 1970, US oil production was between 9.5 and 10 million BPD. Still about 30% even after your hyperbolic curve.

————” This is an awesome accomplishment. And it is all thanks to fracking. Without the techniques of horizontal drilling and hydraulic fracturing, this Great American Oil & Gas Boom would simply not exist.”———

Maybe so……………………but Germany is FAR ahead of the US in renewable energy production. So much so, that they are in the process of shutting down their nuclear reactors permanently. And they are converting their transportation energy to CNG(methane, compressed natural gas). And Germany does not use fracking………………they have no natural gas resources to frack. They make their methane(CH4) from sewage and agricultural waste. They expect to be producing 20% or more of their CH4 needs by anaerobic digestion by the year 2015, five years ahead of the original goal……….and in spite of greatly expanded demand to replace nuclear power and petroleum for transportation.

Germany can produce CH4 by anaerobic digestion as far into the future as they wish——-so long as they have farms and people, they can’t run out. And they won’t have to worry about contamination of their water or food supply by toxic fracking chemicals. Producing CH4 by anaerobic digestion leaves two waste products—–compost(the richest, most fertile soil you can have), and clean, usable water.

——–” First of all, we don’t need any new federal bureaucracy, and we certainly don’t need any portion of the $10 billion in federal royalties from oil and gas production on federal lands to go into a slush fund from which bureaucrats get to pick pie-in-the-sky technologies to invest in.”————-

I think if you check Chris——you will find that $10 billion royalty figure represents ALL lease payments to the US Federal Treasury, including things like metals mining, timber rights, navigation rights, use fees, etc. etc.———–NOT just oil and gas royalties. You will not find any exact amounts reported—-it is so excruciatingly small, it amounts to private piracy of public property. I once did calculations by making inference of figures from several agency sources. I came up with royalty payments of slightly less than $2/barrel (which sells for about $100/barrel) best case——and about $1/barrel, most likely case.

——–” An energy trust fund is a terrible idea, and could well be considered a backdoor approach to reopen the debate on the national carbon tax. We don’t need either.”———–

If the petroleum companies would show some initiative to change their business plan from pure market and environmental exploitation for short term profits—————-there would be no need for an energy trust fund.

Petroleum companies COULD be leaders in changing our energy mix to provide clean, safe and affordable energy for Americans. It is well within the sphere of what they do——-they are in the business of providing energy. They SHOULD be leading the way into a future where energy is renewable, sustainable, clean, safe and affordable.

If they would do that…………..no one would be happier than I would. All the tools they need to start are available and in use right now.

Instead—-I see, what appears to me to be pirates in Gucci suits and briefcases whose only goal seems to be looting, destruction and pillaging in the name of quarterly profits. Good business plans do not need to deny the existence or reality of problems. Good business plans need to look further into the future beyond the next quarterly report date.

Please explain how all of this great oil production benefits the consumers. prices are still climming. i take it that the government gets more oil, exports it, gets the money, and the consumers pay a lot more. with oil production up, imports down and better car gas milage, gas price should be down not up, or is there something in the equation that is missing